Commitments And Contingencies

9 Months Ended

Sep. 30, 2011

Commitments And Contingencies [Abstract]

Commitments And Contingencies

12. Commitments and Contingencies

Commitments

Construction and Purchases in Progress — The estimated cost to complete capital expenditure projects in progress at September 30, 2011 was approximately $77.3 million, of which $47.4 million is obligated through contractual commitments. The total estimated cost primarily represents expenditures for construction of the Global 1201, our second new generation derrick/pipelay vessel. This amount includes aggregate commitments of 18.6 million Singapore dollars (or $14.3 million as of September 30, 2011) and 1.2 million Euros (or $1.7 million as of September 30, 2011). We have entered into forward contracts to purchase 7.5 million Singapore dollars to hedge certain of these purchase commitments. (See Note 5 for additional information related to our forward foreign currency contracts.)

Off Balance Sheet Arrangements — In the normal course of our business activities, and pursuant to agreements or upon obtaining such agreements to perform construction services, we provide guarantees, performance, bid, and payment bonds, and letters of credit to customers, vendors, and other parties. At September 30, 2011, the aggregate amount of these outstanding bonds was $32.4 million, which are scheduled to expire between October 2011 and July 2012, and the aggregate amount of these outstanding letters of credit was $14.9 million, which are due to expire between October 2011 and March 2013.

Contingencies

During the fourth quarter of 2007, we received a payroll tax assessment for the years 2005 through 2007 from the Nigerian Revenue Department valued at $17.6 million based on the exchange rate of the Nigerian naira as of September 30, 2011. The assessment alleges that certain expatriate employees, working on projects in Nigeria, were subject to personal income taxes, which were not paid to the government. We filed a formal objection to the assessment on November 12, 2007. We do not believe these employees are subject to the personal income tax assessed; however, based on past practices of the Nigerian Revenue Department, we believe this matter will ultimately have to be resolved by litigation. We do not expect the ultimate resolution to have a material adverse effect on our future financial position, operating results, or cash flows.

During 2008, we received an additional assessment from the Nigerian Revenue Department valued at $36.1 million based on the exchange rate for the Nigerian naira as of September 30, 2011 for tax withholding related to third party service providers. The assessment alleges that taxes were not withheld from third party service providers for the years 2002 through 2006 and remitted to the Nigerian government. We have filed an objection to the assessment. We do not expect the ultimate resolution to have a material adverse effect on our future financial position, operating results, or cash flows.

During the third quarter of 2009, we received a tax assessment from the Mexican Revenue Department in the amount of $5.9 million related to the 2003 tax year. The assessment alleges that chartered vessels should be treated as equipment leases and subject to tax at a rate of 10%. We have engaged outside counsel to assist us in this matter and have filed an appeal in the Mexican court system. We await disposition of that appeal. We do not expect the ultimate resolution to have a material adverse effect on our future financial position, operating results, or cash flows; however, if the Mexican Revenue Department prevails in its assessment, we could be exposed to similar liabilities for each of the tax years beginning with 2004 through the current year.

We have one unresolved issue related to an Algerian tax assessment received by us on February 21, 2007. The remaining amount in dispute is approximately $10.4 million of alleged value added tax for the years 2004 and 2005. We are contractually indemnified by our client for the full amount of the assessment that remains in dispute. We have engaged outside tax counsel to assist us in resolving the tax assessment.

During the first quarter of 2011, we received corporate tax demands from the Indian Revenue Department related to tax years 2005 through 2009 in the aggregate amount of $4.5 million (net of taxes paid). The assessments allege that taxable income was understated because certain tax provisions available to the marine construction industry were not applicable. We have engaged outside tax counsel to assist us with the tax demands and have filed objections to the assessments. We do not expect the ultimate resolution to have a material adverse affect on our future financial position, operating results, or cash flows.

During the first quarter of 2011, we also received tax demands for tax withholding on foreign vendors from the Indian Revenue Department in the aggregate amount of $4.4 million (net of taxes paid) related to tax years 2007 through 2009. The assessments allege that taxes were not paid at the proper rate of tax and additional tax is due. We have engaged outside tax counsel to assist us with the tax demands and have filed objections to the assessments. We do not expect the ultimate resolution to have a material adverse affect on our future financial position, operating results, or cash flows.

Investigations and Litigation

We are involved in various legal proceedings and potential claims that arise in the ordinary course of business, primarily involving claims for personal injury under the General Maritime Laws of the United States and Jones Act as a result of alleged negligence. We believe that the outcome of all such proceedings, even if determined adversely, would not have a material adverse effect on our business or financial condition.

Litigation Related to the Merger

Shortly after the announcement of the Merger, several putative class action lawsuits challenging the Merger were filed in the District Courts of Harris County, Texas, the District Court in the Parish of Calcasieu, Louisiana, and the United States District Court for the Southern District of Texas against various combinations of Global, Technip, Apollon, and the individual members of our board of directors. The complaints filed in those lawsuits generally allege, among other things, that the members of our board of directors breached their fiduciary duties owed to our public shareholders and Global by entering into the Merger Agreement, approving the Merger, failing to take steps to maximize our value to our public shareholders, ignoring alleged conflicts of interest, and issuing a preliminary proxy statement that omitted material information, and that Global and Technip aided and abetted such breaches of fiduciary duties. In addition, the complaints allege that the Merger improperly favors Technip and that certain provisions of the Merger Agreement unduly restrict our ability to negotiate with other potential bidders. The complaints generally seek, among other things, declaratory and injunctive relief concerning the alleged fiduciary breaches, injunctive relief prohibiting the defendants from consummating the Merger and other forms of equitable relief.

On October 27, 2011, the parties to all of these actions entered into a memorandum of understanding setting forth the terms and conditions of an agreement in principle to resolve all of the claims relating to the merger in exchange for the inclusion of certain supplemental disclosures in the definitive proxy statement which was filed by Global on October 28, 2011. The memorandum of understanding provides, among other things, that the parties will execute and submit to the District Court of Harris County, Texas for review and approval a stipulation of settlement, that the actions will be dismissed with prejudice on the merits, that defendants will receive a general release from any and all claims relating to, among other things, the Merger, the Merger Agreement and any disclosures made in connection therewith, and that the settlement is conditioned on, among other things, consummation of the Merger, completion of certain confirmatory discovery, class certification and final approval by the District Court of Harris County, Texas following notice to the shareholders of Global Industries. In connection with the settlement, Global Industries or its successor-in-interest has agreed to pay, subject to court approval, an award of fees and expenses to plaintiffs' counsel in an amount of $837,500.